Aftershock!

Cunningham Lindsey claims inspector Jordan Legg remembers literally bouncing along in his car while returning from a site near Christchurch, New Zealand on Tuesday morning, Feb. 22, 2011.  He had been inspecting a site that sustained some minor damage during the September 2010 earthquake in Christchurch.

“I was coming from outside of the city, in a little place called Rolleston, which is pretty close to where the [earthquake] epicenter was in September,” says Legg, who went to Christchurch from Cunningham Lindsey’s Ottawa office. “I was just going there to take a look at some stuff. He had some damage to the house, but it wasn’t too, too bad. So I’m coming back into the city, and I was about maybe two or three kilometres outside of the city centre. I was actually driving in my car when it [the February 2011 earthquake] struck. My car, actually, was bouncing on the street. When it initially happened, I was thinking: ‘What’s going on with this car?’ Maybe it was stalling or misfiring or something. And then I looked at the cars next to me, and then you start looking at the buildings around you, and you’re trying to see where your escape plan is. Luckily everybody was okay.”

Cunningham Lindsey adjuster Denisse Cumby of Barrie, Ontario was also working in Christchurch at the time. When the 6.3 Mw ‘aftershock’ earthquake hit Christchurch on Feb. 22, she was taking a lunch break while working on files related to Christchurch’s September 2010 earthquake.

“When the [February] earthquake hit, I happened to be at a McDonald’s actually,” she says. “Everything started rattling. Everyone started running out and I thought, ‘I guess I’d better run out with them, too,’ so I went outside the building following along everybody else. Then it stopped. And so we all looked around and went back in. I got my order, sat down and ate. It [the tremor] wasn’t anything big, but once the aftershocks continue, that’s when it really plays on you and you think, ‘This is way worse than what I expected.’

The February earthquake may have been smaller than the initial September quake, but it did more damage because it hit at a time of day when more people were in the city. Also, the second quake magnified damage to buildings already weakened in 2010. Catastrophe modeler EQECAT estimated the September 2010 quake in Christchurch caused about $3 billion in insured damage. In contrast, the smaller February 2011 earthquake caused between $3 billion and $8 billion in damage. In June 2011, another aftershock quake hit Christchurch – this time a 6.0 Mw tremor.

For Cumby, the June 2011 quake came as no surprise. “For me, the continuous aftershocks after the initial one, after some time, start to get to you, because they are just continuing and continuing,” she says. “You know it is causing more and more damage everywhere. It’s just the continuous part after that affected me the most.”

The aftershocks continue to affect the global re/insurance industry as well. The June 13, 2011 earthquake caused further estimated insured damage of between $3 billion and $5 billion, according to catastrophe modeler EQECAT, although this figure has come under scrutiny. Legg says the ‘aftershock’ phenomenon has stirred discussions within the local insurance industry about what counts as ‘separate’ earthquake events. The concept isn’t so clear when there are so many related aftershocks.

“There was a lot of talk with the insurers and reinsurers about: ‘How are we going to separate these events?'” Legg says of his experience in February. “There are a lot of big earthquakes and each one of them was separately defined as a specific event. So there was a lot of separation between what constituted an ‘aftershock’ and what constitutes a separate earthquake.”

For adjusters working on the scene, the continuous aftershocks highlighted the need for meticulous, detailed measurement of the initial damage. “Our loose instruction [from insurers in February] was: hopefully you [adjusters] did a very detailed account of what was damaged [in September], because we [insurers] want to try and make some separation.”

In some instances, this may be easier said than done. Take, for example, a situation in which an adjuster recommends replacing a sheet of drywall after the September quake, and the February quake made the crack bigger. In this situation, the adjuster’s initial assessment didn’t actually change as a result of the second quake, since the sheet of drywall was subject to be replaced anyway. For an insurer, this means the damage is counted as part of the insured damage of the September quake and not the February quake. “There was that differentiation, which got very complicated,” Legg said.

The job was made easier by having access to detailed adjuster notes and pictures from the first quake. But different adjusters work in varying degrees of detail. And if a detailed assessment by an adjuster was not available after the original September quake, adjusters had to rely on reports by property owners to help them differentiate the damage. “Sometimes with the cracks on pathways and driveways, you can tell [which quake caused the damage], because stuff will start growing through it – weeds and so forth,” Cumby says. “You can tell [the crack] has been there for awhile since the previous [September earthquake]. With interior damage, it’s harder. You can’t really say what cracked in the first one, what cracked in the second one. And the cracks got larger from the second one than they did the first time, right? So you work with the insured when you don’t have the information from the previous inspection.”

Certainly the whole phenomenon of costing damage in an area continuously damaged by aftershocks is of concern to the local and global re/insurance industry. After the June 2011 quake, the Insurance Council of New Zealand (ICNZ) expressed concern about the long-term effect of continuing earthquake aftershocks in the Christchurch area. The ICNZ estimates the industry will pay almost $8 billion into the Canterbury economy and the rebuilding of Canterbury and Christchurch generally following the June earthquake.

“The insurance industry has indicated the continued aftershocks in Canterbury are being viewed with increasing concern by reinsurers and international insurers,” the ICNZ said in a statement posted online. “The aftershocks raise the level of risk seen in New Zealand and may have a significant impact on insurance and reinsurance policies in the future.”

The long-term impact may see increases in premiums and excesses, or even a questioning of the level of insurability for earthquakes that New Zealand receives, ICNZ says.

Will the ongoing aftershocks in Christchurch have any lessons for Canada, where earthquake risk is present in Vancouver, Ottawa/Montreal and in Atlantic Canada? Often when earthquake risk is discussed in Canada, it is not explicit if the risk is a one-time-only risk of a quake, or whether there is additional risk of aftershock effects. Legg says it is wise to consider the example of Christchurch, which means discussing the possibility that one major quake may be followed by others.

“It’s something we haven’t seen before [in Canada],” he says. “But as far as the lesson [to be learned from Christchurch] goes, when you get a huge earthquake like this, you just have to anticipate that there are going to be more. You have to anticipate that there are going to be aftershocks of the same – or sometimes even higher – magnitude and you just have to prepare for that. You have to keep that in mind where adjusting is concerned. When you are adjusting the claim, you have to be adamant in keeping track of what’s been damaged and how it relates to that specific incident, just in case another one comes around and you’re going to need to do a further assessment on it and separate the two.”